Vilsack backs Daugaard in railroad fight

USDA had backed purchase of DM&E with conditions

Sep. 25, 2013

Written by

Dennis Daugaard

Tom Vilsack

Gov. Dennis Daugaard just recruited a big ally in his battle with Canadian Pacific Railway: the U.S. Secretary of Agriculture.

Secretary Tom Vilsack, a former Iowa governor, sent the letter after meeting with Daugaard earlier in September.

Canadian Pacific bought the Dakota, Minnesota & Eastern Railroad in 2008. The purchase gave Canadian Pacific track across the Midwest, including access to Kansas City, as well as the potential to build an extension to carry coal out of Wyoming’s Powder River Basin.

In South Dakota, DM&E main line runs east-west across the center of the state, passing through Brookings and Pierre on its way to Rapid City.

At the time of the purchase, Canadian Pacific said it would invest hundreds of millions of dollars in upgrades to DM&E track — though the precise nature of those promises are under dispute.

After Canadian Pacific put the South Dakota portion of the DM&E track up for sale in December, Daugaard began seeking answers as to how much money had been spent. When he didn’t find what he was looking for, Daugaard filed a petition with the Surface Transportation Board, asking the regulatory board to require Canadian Pacific to disclose information about its DM&E track upgrades.

If that evidence shows Canadian Pacific didn’t meet its promises, Daugaard asked the Surface Transportation Board to block a sale until the upgrades do happen.

Canadian Pacific says it has more than met its promises. In its own filing to the STB, it said it has spent $405 million on upgrades to DM&E track.

“Our filing to the STB shows we have invested substantially more than the approximately $300 million in improvement and replacement capital outlined to the STB prior to the purchase,” Canadian Pacific spokesman Ed Greenberg said. “We met our commitment to the STB.”

Daugaard’s office said Canadian Pacific was double-counting some expenses and hadn’t addressed its broader concerns.

In his letter, Vilsack says the board should require Canadian Pacific to provide a “full accounting” of its investments in the DM&E track.

“USDA provided its support of the merger (between CP and DM&E) on the condition that CP kept all current connections to these other railroads open at economically competitive and nondiscriminatory rates,” Vilsack writes. “USDA also encouraged CP to make sufficient investment in the former DM&E line to maintain or improve its condition.”